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The value of the controversial Australian Gorgon project and others in Nigeria were major factors behind the downgrade, Shell said on Friday. It is the third successive year that Shell failed to replace its produced oil and the second unexpected disclosure in two weeks.
The world financial markets reacted sharply to the news, wiping around 7.5% or A$19 billion from the value of the company in Friday's trading. Calls have also intensified for the resignation of chairman Sir Philip Watts, who has been on the back foot over his performance according to reports in the financial media.
Shell said half of the downgraded oil equivalent reserves were attributable to Nigerian and Australian projects. The company has been carrying thirteen of Gorgon's estimated 40 trillion cubic feet of gas (tcf) of probable reserves as booked reserves since 1997 when the first non-binding letter of intent were signed.
Both Woodside and the Gorgon partners quickly distanced themselves from the Shell downgrade. Woodside, which has Shell as a 34% shareholder, said the downgrade did not affect them.
A Woodside spokesman was reported as saying the companies "were completely separate when it comes to reserves estimates," and carried their own independently calculated reserves.
ChevronTexaco, with 57% of Gorgon, said it had never booked any reserves figures for Gorgon as it was an undeveloped project while ExxonMobil was reported as saying it was confident in its own reserves estimates.
Shell's full year figures for 2003 will be published on February 9 with many analysts saying Watts has until then to reassert his leadership. He and finance director Judy Boyton refused to take part in a conference call on Friday to explain the fall, letting his investor relations team face the barrage of angry investors.